By Reneilwe Mthelebofu – Communications Department (FSCA)
The Organisation for Economic Co-operation and Development (OECD) defines trust as a person’s belief that another person or institution will act consistently with their expectations of positive behaviour. The OECD highlights that trust in institutions requires that they are “competent and effective in delivering on their goals, that they operate consistently with a set of values that reflect citizens’ expectations of integrity and fairness”, and that they align business ethics with broader societal expectations.
With this in mind, the Financial Sector Conduct Authority (FSCA) recently hosted its first industry-wide conference under the theme Inspiring trust: Evolutions In Financial Conduct Regulation. The conference brought together financial sector stakeholders to share insights on regulatory trends and reflect on their impact on global, regional and South African landscapes.
In his opening address, FSCA Commissioner Mr Unathi Kamlana touched on four themes: the cost-of-living crisis and increasing vulnerability of consumers; the issue of market integrity; the structural change that the two-pot system represents in terms of how regulators think about retirement savings policy and customer outcomes and finally, the need to build trust in the financial sector by policymakers and industry.
Mr Kamlana emphasized how trust is an essential ingredient to building confidence – which is the key to a thriving financial sector and stable economy.
“We chose this theme because of its strategic importance for our work as the FSCA. It i’s a fundamental foundation for the entire system and how it operates. The scandals and the reputational knocks that the sector takes are not helpful, we need to take proactive measures to uphold and rebuild trust”.
Delivering the keynote address was Governor of the South African Reserve Bank (SARB), Mr Lesetja Kganyago who echoed Commissioner Kamlana’s sentiments on the issue of trust. He contextualised the FSCA’s role in the financial sector as that of a guardian responsible for the sector’s moral capital. “Ultimately, your moral capital is like your financial capital. In a crisis, that’s where you need it most. If you do not have [enough of] it, you will fail. I do not know how to devise a capital adequacy ratio to ascertain whether we have enough. Even if we cannot measure trust, it is every bit as valuable as financial capital,” explained Mr Kganyago.
Trust is inspired when organisations are competent and effective in delivering on their goals. It is for this reason that the FSCA embarked on this proactive industry engagement in anticipation of the Conduct of Financial Institutions (CoFI) Bill. This Bill is set to enhance the regulatory approach by enabling agility in response to cross-sector risks. Instead of waiting for the official enactment of the Bill before adjusting its frameworks and processes, the regulator is already aligning its current practices with the Bill's principles to ensure a smooth transition. This will go a long way in minimising disruptions and maximising benefits for both consumers and the industry.
Another conference highlight was the update on the licensing of crypto asset service providers (CASPs). The FSCA declared crypto assets as a financial product on 19 October 2022, which means that anyone who renders financial services (i.e., advice and/or intermediary services) in relation to crypto assets must, inter alia:
- be authorised under the FAIS Act as a financial services provider (“FSP”) under section 8 of the FAIS Act; or
- be appointed as a representative of an authorised FSP; and
- comply with the requirements in terms of the FAIS Act and subordinate legislation.
- Comply with other applicable requirements from the FSCA during last year’s transitional period that ended on the 30th of November 2023.
Status of licence applications
Total number of licence applications received |
355 |
Total number of licence applications received by 30 November 2023 |
308 |
Total number of licence applications received from 1 December 2023 to date |
47 |
Total number of licence applications approved as at 12 March 2024 |
59 |
Total number of withdrawn licence applications |
34 |
Total number of licence applications in progress |
262 |
It was acknowledged that the consultative nature of the licence application process required ongoing engagement with applicants. In certain instances, these engagements resulted in the withdrawal of any license applications that could not demonstrate compliance with the competency requirements; lacked clear and comprehensive business plans, policies, processes and procedures that incorporated crypto asset activities; and/or showed a general lack of operational readiness to conduct crypto asset-related services, amongst others.
The next step will be to communicate the outcome of pending license applications to relevant entities; supervise authorised CASPs on an ongoing basis and commence investigating persons who conduct financial services relating to crypto assets, without authorisation to do so.
The conference delegates were highly-engaged by presentations and panel discussions with thought-leaders on key topics at the heart of financial sector regulation such as organisational culture; governance and accountability; artificial intelligence (AI) and consumer protection; updates on the licensing of crypto assets service providers; sustainable finance including when to adapt sustainability reporting standards and green taxonomy into law; as well as update on progress made with regards to getting South Africa off the grey list.
To watch some of the insightful panel discussions from the two-day conference, please click on the links below:
Day 1 – FSCA Conference 2024
Day 2 – FSCA Conference 2024
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